Central bank plans further monetary policy tightening

Friday, June 20, 2008
The State Bank of Vietnamese again on June 19 announced a further tightening of monetary policy over the next six months to fight inflation and stabilise the domestic monetary market.

The central bank is determined to keep total credit growth under 30% (year on year) by the end of this year.

It plans to do this through flexible management of exchange – rate instruments, open-market operations and refinancing activities.

The bank said the credit system would be more closely monitored in terms of credit quality, lending for real estate investment, “business on valuable papers,” consumer loans and other trading on foreign currencies and gold.

Credit loans or investment will be saved for effective business, particularly in farm production and the export sector.

Small loans will also be made available for those on low incomes and students in line with recent Government policy.

However, loans will be limited for non-production sectors, at the same time.

The money watchdog also plans to set up a master project to prevent speculation on foreign currency on parallel markets (blackmarkets).

In fact, in the past few months, the central bank has been aggressive on monetary policy, which is seen to have generated positive results.

In an effort to further curb credit expansion and raise the attractiveness of dong deposits, the base rate was further increased to 14% on June 10.

The central bank also responded in a timely way curbing dramatic fluctuation of the US dollar on the parallel market.

It has restricted illegal foreign currency trading and tried to bring the blackmarket rate back toward the official rate.

Previously, the daily trading band was also adjusted from plus or minus 0.75% to plus or minus 1% to reflect the real market.